Investors are currently detecting a dovish shift in the in the messages coming from Federal Reserve Chairman Jerome Powell, since the latest policy meeting this month.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD3.61%$9,180
Trade talks to weaken dollar’s grip long term

Jerome Powell, along with Vice Federal Reserve Chairman Richard Clarida, both seem to now be showing a less bullish approach to monetary policy change. It seems Federal Reserve Leadership is now more open minded than it has been previously.

There is still expected to be a further interest rate hike this year with an expected rise of 0.25% in December bringing interest rate levels to a very impressive 2.5%. The question on everyone’s lips however is what will happen in 2019?

Head of Global Macro Strategy at TD Securities Michael Hanson, believes Jerome Powell will stick to Jerome Powell’s original Interest Rate Forecast of three hikes next year of 0.25% which would bring the interest rate up to 3.25%.

Natwest Senior Economist Kevin Cummins, believes the Federal Reserve will move away from the recent one hike per quarter cycle and thinks decisions will be far more data dependent.

I would tend to agree, going by Jerome Powell’s recent statement.

“So, you know, a good example would be you’re walking through a room full of furniture and the lights go off. What do you do? You slow down. You stop, probably, and feel your way.”

I think the US economy will continue to grow and the US dollar will continue to benefit, but perhaps we will see a slowdown and not the same kind of accelerated growth we have seen this year as Trump may well be forced to ease back on current tariffs against a number of countries.

Powell is due to speak later today and no doubt investors will be waiting with baited breath to see if there is any hint to monetary policy next year.

GDP data released later Today

Keep an eye on Gross Domestic Product (GDP) data later today as this gives a real indication as to US growth and can cause movement on the exchange if data comes in away from expectations. There is predicted to be little movement with figures predicted to come in at 3.5%.

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